Can I Cover Dividends With Income Protection Insurance?

As I am a director of a limited company a large percentage of my earnings come in the form of dividend income so I was wondering whether it is allowable to cover dividends on an Income Protection plan?

Question asked by James Drinkwater

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How Insurers View Protecting Dividends

The good news is, most insurers will allow you to insure dividends on a long term Income Protection plan. This is because they understand that company directors earn a large amount through dividends.

  • Personal Income Protection – On a personal plan, it is usually possible to cover up to 65% of your gross (pre-tax) personal earnings, which mainly consists of salary plus dividends. Some insurers do limit the maximum amount of cover to 50% of gross income. So, setting the amount of cover within this limit would enable far more insurers to provide competing quotes.
  • Director Income Protection – With an Executive Income Protection plan, it is usually possible to cover up to 80% of gross earnings. It’s important to note that the benefit paid by the insurer would incur income tax (and National Insurance). Rather than you paying for premiums, your company would pay for them. Usually the cost can be put through as a business expense which can have tax benefits.

Some insurers will average both salary and dividend income over the last 3 years. Others however, will just take salary and dividends over the last 12 months. This is an important factor to consider when deciding which insurer to go with.

Essentially, these insurers want to cover a consistent level of income over time in order for you to maintain living standards.

Need Expert Friendly Advice?

If you need help putting Income Protection in place and ensuring you cover your dividends, don’t hesitate to get in touch. Our expert, friendly team are on hand to help. Just pop us a call on 02084327333 or email

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